Marlboro company ACT navigates promise, perils of stem cell science

Thursday

Jan 30, 2014 at 8:44 PMJan 30, 2014 at 9:02 PM

By Lisa Eckelbecker TELEGRAM & GAZETTE STAFF

MARLBORO — Advanced Cell Technology Inc. is reportedly close to releasing news on its first possible medical treatment, even as the company deals with lawsuits, a securities probe and most recently, management changes.

It's a mixture of toil and trouble that the small biotechnology company has juggled through much of its 20-year history as it has used stem cells to create treatments for difficult diseases.

"When I look at the science, the science behind this company is fantastic," said Jason Kolbert, managing director of Maxim Group LLC and the only Wall Street analyst following Advanced Cell. "The execution, the historical execution behind ACTC, has been a disaster."

Founded on animal cloning discoveries made by scientists at the University of Massachusetts at Amherst, Advanced Cell focuses on embryonic stem cells, some of the earliest cells formed by a developing embryo.

Over the years, the company used its know-how to clone an endangered ox known as a gaur. It reported on a technique that allowed it to extract cells from an embryo without damage.

More recently, the company focused on using embryonic stem cells to generate retinal pigment epithelial, or RPE, cells, which are found at the back of the eye.

Advanced Cell collaborators began transplanting the RPE cells in 2011 into the eyes of patients with two types of macular degeneration, a disorder that causes vision loss. Trials are underway at medical centers in the United States and the United Kingdom to determine if the treatments are safe.

As of mid-January, the company reported 32 patients had been treated with its cells. News on general results from the trial, the first of three phases of human testing typically required by the Food and Drug Administration, is "imminent" and will be followed by an in-depth presentation at a conference or in a medical journal, Advanced Cell spokesman David Schull said.

The company hopes to move into the second phase of human testing during the second half of 2014, according to Mr. Schull.

"The primary focus at this time is to advance cell therapies into the mid-stage clinical studies," he said.

Yet with no products on the market and little revenue from licensing its technology to others, Advanced Cell also has financial challenges.

The company has racked up an accumulated deficit of more than $300 million, according to SEC filings, and years of fundraising have flooded the market with 2.6 billion shares of Advanced Cell stock. Shares closed yesterday at 7 cents in over-the-counter trading.

At the end of September, the company had $5.5 million in cash on hand and was facing shareholder lawsuits.

"I look at it and I say, 'Explain to me how much money they have, and show me how they're going to go out there and do, not expensive trials, but the most expensive trials, because it's regenerative medicine,' " said Stephen G. Brozak, president of WBB Securities, who follows a number of stem cell companies but not Advanced Cell.

As of last week, Advanced Cell is also looking for a new chief executive. The last CEO, Gary Rabin, left Jan. 21 after he and company directors determined it was in the best interest of all, according to Mr. Schull.

"This was a mutual decision," Mr. Schull said.

Mr. Rabin took over Advanced Cell when its previous CEO, William M. Caldwell IV, died in 2010.

Under Mr. Rabin, the company agreed to pay $4.1 million to settle Securities and Exchange Commission allegations that it sold unregistered shares in 2008 and 2009 and failed to disclose the transactions soon enough. The company also closed a financing worth up to $15 million in 2012 with Chicago investment firm Lincoln Park Capital, money that supports the company's work and its 35 employees.

Mr. Rabin drew questions, too, from regulators and the company's enthusiastic band of shareholders who exchange ideas online. The SEC is investigating Mr. Rabin's alleged failure to properly report 27 stock sales between February 2011 and January 2013, the company reported in September.

Shareholder Patrick Curzio, an individual investor who lives in Virginia, started a petition on the website MoveOn.org in 2013 calling on directors to look into Mr. Rabin's transactions. About 100 people signed the letter, which Mr. Curzio sent to Advanced Cell's board and investor relations firm.

"As much as I don't wish any ill on Gary Rabin the person, I think he could have made some better choices," Mr. Curzio said. "I still kind of scratch my head about the selling and not reporting it."

Company spokesman Mr. Schull said he was not aware of the letter. Advanced Cell has not publicly estimated what financial liability, if any, it might have as a result of the transactions.

Meanwhile, Advanced Cell collaborators last year received FDA approval to test the company's RPE cells in patients with a severe type of nearsightedness. The company also asked the FDA last year for approval to study a type of stem cell, mesenchymal stem cells, for veterinary therapies.

Mr. Kolbert, the Maxim analyst, thinks Advanced Cell will be able to learn quickly if patients' vision improves after treatment with RPE cells. He said he is watching for the company to publish its early data in a respected medical journal, hire an experienced biotech CEO and raise money while listing its stock on the Nasdaq exchange. In a report last year to clients, he estimated that Advanced Cell could post $2 billion in revenue by 2022.

As for the company's gaffes, so far, he said, so what?

"That's all being fixed," Mr. Kolbert said. " That's all going to go away. On the other side emerges a really interesting company."

Contact Lisa Eckelbecker at leckelbecker@telegram.com. Follow her on Twitter @LisaEckelbecker

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